On Capitol Hill: AAFP President Proposes Blended Payment Model to Fix Medicare Payment System

In the ongoing battle to fix the Medicare payment system for family physicians, the AAFP took its message to Capitol Hill on May 5, when the Academy was invited to testify before a House panel about alternatives to the sustainable growth rate, or SGR, formula.

Congress has to enact a Medicare physician payment system that provides greater support for team-based primary care and the patient-centered medical home, or PCMH, through a blended payment model, AAFP President Roland Goertz, M.D., M.B.A., of Waco, Texas, told the health subcommittee of the Energy and Commerce Committee, during the hearing here.

"Congress, understandably, is most concerned with controlling federal expenditures for health care, especially given the rapidly rising costs for Medicare," said Goertz during his testimony (12-page PDF; About PDFs). However, "There is growing and compelling evidence that a health care system based on primary care will help control these costs, as well as increase patient satisfaction and improve patient health," he added.

"Simply reforming the fee-for-service system, which undervalues preventive health and team care coordination, cannot produce the results that Congress and patients require," said Goertz. He proposed a blended payment model that contains three elements:

Goertz, acknowledging that it will take time to transition to a blended payment model, called for a five-year transition period with mandated payment updates that incorporate higher rates of at least 2 percent for primary care physicians for Medicare fee-for-service payments.

In addition, he noted, Congress should continue to pay the primary care incentive payment for primary care services called for by the Patient Protection and Affordable Care Act, but it should increase that incentive payment from 10 percent to 20 percent. Congress also needs to permanently extend the program that equalizes Medicaid and Medicare payment rates, Goertz said.

"Both of these programs, along with mandated updates that are 2 percent higher for primary care physicians, will help stabilize current (medical) practices that have seen such financial turmoil in the past few years," said Goertz.

During this proposed five-year period, it also will be crucial to encourage as much innovation as possible, said Goertz. "The new CMS Center for (Medicare and Medicaid) Innovation needs to be a key focus of this effort. We believe this center can help CMS create market-based, private sector-like programs that can significantly bend the health care cost curve."

The SGR formula has repeatedly called for cuts in Medicare payments to physicians during the past few years, forcing Congress to step in and negate the cuts. And the problem has continued to grow. In 2010, Congress intervened five times to block impending Medicare payment cuts mandated by the SGR. Without further Congressional intervention, physicians face a cut of 29.4 percent on Jan. 1.

The SGR formula threatens the stability of the Medicare system for both patients and physicians, said lawmakers during the hearing.

The SGR is symptomatic of a "fundamentally flawed payment system," said Rep. Joe Pitts, R-Pa., chair of the subcommittee. "Keeping the current system or making minor adjustments is no longer a viable option."

Congress needs to "work toward a new way of paying for care, for physicians and all providers, that encourages integrated care," noted subcommittee member Rep. Henry Waxman, D-Calif.

The PCMH is an excellent example of an integrated care model that uses a team-based approach to deliver patient-centered care, said Goertz during a question-and-answer session, adding, "There are more than enough demonstrations that already show the benefit (of the medical home)."

Subcommittee member Rep. Tammy Baldwin, D-Wis., also touted the benefits of the PCMH. She described the experience of Dean Health Systems, an integrated health system in her district that has significantly improved care and reduced costs by adopting the medical home model. The health system developed its own payment system to support the PCMH model because of the limitations of the fee-for-service system, said Baldwin.

Developing a medical home where a practice-based care team takes collective responsibility for a patient's ongoing care, "would not have been possible within the (current) fee-for-service construct," said Baldwin.